Increase in the income of buyers (in case of inferior goods) will cause
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Fall in equilibrium price and quantity.
In the case of inferior goods, when income of buyers increases, the demand for such goods falls because consumers now prefer better (superior) alternatives.
As a result:
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Demand curve shifts leftward.
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Equilibrium price falls due to reduced demand.
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Equilibrium quantity also falls since fewer units are now being bought and sold.
Hence, an increase in income leads to a fall in both equilibrium price and quantity for inferior goods.